Fiscal Reality to Hit Quickly for New Governors

Winners of gubernatorial races across the country barely had time to brush the confetti off their shoulders before they began confronting the same economic and fiscal woes that helped drive some of their predecessors from office.

The stakes are particularly high in California, which faces a 12.4% jobless rate and a projected $12 billion budget shortfall. Democrat Jerry Brown not only won the executive office, and his party also gained vast new power over the state's notoriously dysfunctional budget process.

Nikki Haley partly based her successful campaign for governor in South Carolina on her business experience.
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Voters approved a ballot measure that lets the California legislature pass spending plans by a simple majority, rather than the two-thirds vote previously required. Given the Democrats' strength in both chambers, that effectively allows the party to pass a budget without a single Republican vote.

That, in turn, might ease the epic stalemates that have paralyzed Sacramento in the past— but it also dumps more responsibility in Democrats' laps. (Republicans will still be needed to pass tax increases, which must be approved by a two-thirds vote.)

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"Now you have an executive branch and state legislature that will be held accountable," said Bob Hertzberg, a Democratic former California Assembly speaker. "If you don't like the outcome, throw the bums out."

Jerry Brown (D., Calif.) was in a tight race.
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Mr. Brown said he expected a revival in California but was vague on how that would be achieved. Famous for selling the governor's mansion during his stint as governor three decades ago, he said at a Wednesday news conference in Oakland that his leadership will be marked by frugality: "I'll be looking to trim back everywhere I can."

Across the middle of the country, Republicans dominated. The party flipped a dozen seats held by Democrats, including several swing states likely to play a big role in the 2012 presidential campaign, among them Ohio, Pennsylvania and Iowa. They also won a very close contest in Florida, where Rick Scott, the former chief executive of the Columbia/HCA hospital chain, just beat out Alex Sink, the state's chief financial officer.

In many states, sagging economies and soaring budget deficits became major campaign issues. States remain mired in their deepest fiscal crisis in decades, and federal stimulus money is running out.

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Voters in several states turned to Republican gubernatorial candidates who ran on their private-sector experience as corporate executives.

In Michigan, Rick Snyder, a former CEO of Gateway Computer, painted himself as a technocrat willing to risk putting voters to sleep with his 10-point plan for reviving the state. His slogan: "One tough nerd."

In South Carolina, tea-party favorite Nikki Haley talked of keeping the books—at age 13—for her family's clothing store, then returning as an adult and building it into a multimillion-dollar business. Her campaign manager, Tim Pearson, said she would focus first on flattening and simplifying the tax code in hopes of attracting more business to South Carolina.

In Iowa, Republican victor Terry Branstad said he aimed to reduce the commercial property tax and the corporate income tax. "People want a new direction," he said in an interview. "I think that was very clear."

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California was an exception, though, with former eBay Inc. CEO Meg Whitman falling short against Mr. Brown.

For Democratic gubernatorial candidates, California was one of just a few bright spots. The party also took over a job held by Republicans in Vermont and held on to hotly contested governorships in Colorado, New Hampshire and Massachusetts. In Illinois, Democratic Gov. Pat Quinn looked likely to survive, though barely; with 99% of ballots counted, he led by a few thousand votes.

Tuesday's winners said they understood that they would be judged first and foremost on the economy—and that voters would have little patience for four-year plans. Ohio's John Kasich, a Republican former congressman, has pledged that "he'll be able to move the needle within a year," said his campaign spokesman, Rob Nichols.

But with many states now entering their third straight year of fiscal crisis, cutting government spending and stimulating economic growth will be tough, analysts said.

"States have used up the easier solutions to their budget problems," said Robert Ward, deputy director of the Rockefeller Institute of Government at the University at Albany. "It will certainly be harder than the typical campaign ad might make one think."

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Fiscal Reality to Hit Quickly for New Governors

Winners of gubernatorial races across the country barely had time to brush the confetti off their shoulders before they began confronting the same economic and fiscal woes that helped drive some of their predecessors from office.